Buying a car with cash
Even as a car lover I would say yes. There is no other explanation for our behavior. Most of us who would not consider business the purchase of furniture or appliances will get a loan to finance our Auto mobiles without a second thought.
Every time I fill out an application that asks about my family finances, there is always a section that asks how much my car payment is. Since I bought my first car, my answer has always been the same: zero. Yet I invariably see friends and coworkers driving new cars bragging about the great terms they got for business. As you will see, great banking is always an illusion, and you should never really borrow money to buy a car. Cash is still king when it comes to buying your car.
Business leads to lost discounts
Auto mobiles love to attract customers with business offers that sound great. One or two percent APRs are popular, and zero percent offers are sometimes even options. However, the one thing that many people forget is that all these offers come at the cost of a higher price. Read the fine print and you will most likely see a discount being offered to buyers who decline banking. But even in cases where it is not explicitly mentioned, you will always be in a better position to use effective trading strategies when bringing cash to the table.
Car loans are not tax deductible.
A mortgage on your primary residence and a student loan can be great deals because you can deduct interest payments from your income and pay taxes on a small amount. However, there is no such tax deduction on auto loans.
Car loans will be upside down most of the time
We all know how a car depreciates by thousands of dollars the moment you take it off the lot. From that point on, you are much more likely to owe more on the car than it is worth. Being upside down on a Cash For Cars is, in many ways, just as bad as being upside down on your home loan. In both situations, you are paying more for something than it is worth. And while a home may one day increase in value, this cannot be said for most cars on the road today.
Paying interest can drain your finances
While most people just assume that they will make a car payment every month, imagine what you could do if you never had that obligation. You can save for retirement, pay for a larger home, or simply increase your discretionary spending. Don’t forget that when you make a car payment, you are paying interest. Instead, why not save money to buy a new car with cash and earn interest at the same time?
Car payment eats into your safety net
Since my wife and I own our cars, we have fewer monthly expenses. If we lose our income, our safety net will last longer than it would otherwise. In fact, when I envision an apocalyptic scenario where I am out of work for an extended period of time, I could even sell my car and use the proceeds for the financial survival of my family. With a car loan or rental payment, you would be in a much more difficult financial positions. Car loans hide the true cost of your vehicle
Buying a car with cash and selling it years later really makes you understand how a vehicle depreciates. But when the purchase is financed, this becomes less obvious. If you are like most people, when the car is canceled, you will trade it in advance for your next vehicle and start the cycle again. This makes it harder to see your car purchase for what it really was: one of the most expensive things you ever bought that then lost enormous value in your time.
How to avoid a car loan
First of all, you need to put aside the need to drive the latest and greatest vehicle, even if you live in an image-driven city like Los Angeles. A car is simply a tool to get from one place to another. Frankly, it’s just another thing you own and it’s not worth going into debt.
Then you must realize that there are a lot of really fun, reliable and safe used cars available for a lot less than you think. Even if you love cars, there is probably something you can live with in almost any price range that you can afford with cash.